Edwards Deming is best known for his teachings on statistical methods for quality control. However, his legacy goes well beyond his work on variance. In the final years of his life, Dr. Deming recognized that the Industrial Age was ending and that a new philosophy of manufacturing management was needed. That new philosophy, which he called a “System of Profound Knowledge”, was outlined in Deming’s The New Economics for Industry, Government and Education. 
This post builds on Deming and Profound Knowledge, a post to this blog from October 2013. “System” is the key concept in Deming’s new philosophy. This post emphasizes systems thinking by relating Eliyahu Goldratt’s Theory of Constraints, especially as presented in his book The Goal  to Edwards Deming’s System of Profound Knowledge. – C.H.
Deming’s System of Profound Knowledge
Edwards Deming is arguably the best known of the later 20th century quality experts. He taught quality methods and practices in Japan in the 1950s and ‘60s; then helped American manufacturers catch up to Japanese in the 1970s, ‘80s and into the ‘90s. Late in his life, Deming formulated a System of Profound Knowledge to serve as a guide to manufacturing managers and leaders to address the future.
Dr. Barbara Berry  describes the System of Profound Knowledge as a “management system grounded in systems theory”. She goes on to say:
“Deming believed profound knowledge generally comes from outside the system and is only useful if it is invited and received with an eagerness to learn and improve. A system cannot understand itself without help from outside the system, because prior experiences will bias objectivity, preventing critical analysis of the organization.”
Deming’s System of Profound Knowledge  consists of four interdependent components. Manufacturing leaders need to thoroughly understand all of them and how each interacts with the others:
> An understanding of the theory of knowledge
>> A knowledge of variation
>> An understanding of psychology
>> An appreciation for systems
The Goal and System of Profound Knowledge
I’m convinced that Goldratt developed the thinking behind The Goal quite independently from Deming’s work on the System of Profound Knowledge. However, these two eminent management philosophers come to remarkably similar conclusions regarding the bases for a 21st century model of management thinking. Here are some parallels:
Theory of Knowledge
Deming holds that knowledge is more than just information. Knowledge results from systematic evaluation and verification. Systematic analysis, evaluation and verification are achieved through application of a process. Deming suggests the PDSA (Plan – Do – Study – Act) cycle.
Similarly, Goldratt suggests that managers use a scientific approach to thinking. The introduction to the 1st edition of The Goal says: “The secret to being a good scientist, I believe, lies not in our brainpower. We have enough. We simply need to look at reality and think logically and precisely about what we see. The key ingredient is to face inconsistencies between what we see and deduce the way things are done. This challenging of assumptions is essential to breakthroughs.”
Some years after the publication of The Goal, Goldratt presented a set of Thinking Processes. The Thinking Processes are tools for use in analyzing relationships within systems. Like the scientific method and PDSA cycles, the Thinking Tools provide a means for systematic analysis, evaluation and verification.
Knowledge of Variation
Variation and its causes lie at the heart of Deming’s work with quality. Deming teaches that two modes of variation exist: common cause and special cause. The former are an intrinsic characteristic of the production process. The later are due to sporadic events outside the production process. Deming uses simple experiments including his famous red bead experiment to demonstrate the futility of trying to control common cause variation from within the process.
The Goal tells the story of a Boy Scout hike. The scout hike provides an analogy for a manufacturing process consisting of serially related operations. The effect of variation in walking speeds over time in a line of hikers provides insight as to the nature of a constraint and the effects of that constraint on throughput and on work in process inventories. The scout hike also demonstrates that the process itself can be modified in order to reduce the common cause variation.
Deming recognized that people are not simply extensions of the machinery. He decried command and control management and advocated “leadership, for a change”. Deming appreciated that people are motivated intrinsically, and that extrinsic efforts to motivate are futile, if not counter-productive.
The Goal is extensively psychological. First, it is a business novel — an exposition of principles through a story that readers can readily relate to. Secondly, Jonah — one of the primary characters — is a Socratic teacher. The story demonstrates human reactions to change and human behaviors under stress.
An Appreciation for Systems 
“Perhaps Dr. Deming’s greatest contribution and biggest departure from the past was to view an organization as a system. He defined a system as a network of interdependent components that work together to try to accomplish the aim of the system. The aim for any system should be that everybody gains, not one part of the system at the expense of any other.” 
Similarly, The Goal presents a manufacturing organization as a system. As the title of the book suggests, the system exists to pursue an aim — a goal — that may not be obvious to everybody involved with the system. The story examines components of that system, their dependencies and their interactions. They learn that actions to optimize individual components of a system do not result in optimizing the system as a whole with respect to the goal of that system. They also learn that Pareto’s Principle doesn’t necessarily apply when analyzing systems. Said briefly: The Goal could be a text for Systems Thinking 101.
What does all of this have to do with Sustainability? Both The Goal and The System of Profound Knowledge provide insight as to how manufacturing organizations can survive and prosper in the 21st century. Both advocate significant changes in management thinking. Interestingly, the first editions of The Goal (1980s) define the goal of a manufacturing organization as “make money now and in the future”. Later editions (1990s) modify that to “become an ever-flourishing company”  — recognizing, as Deming did, that the aim of an organization goes beyond making money.
Thoughtful comments and experience reports are always appreciated.
… Chuck Harrington (Chuck@JeraSustainableDevelopment.com)
P.S: Contact me when your organization is serious about prospering in the globalized 21st century … CH
This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.
 The System of Profound Knowledge is discussed in detail in Edwards Deming, The New Economics for Industry, Government and Education – 2nd Edition, MIT Center for Advanced Educational Services (1994)
 Goldratt, E. and J. Cox, The Goal: A Process of Ongoing Improvement, 3rd Revised Edition, North River Press (2008)
 Dr. Barbara Berry, There is a Relationship Between Systems Thinking and W. Edwards Deming’s Theory of Profound Knowledge, available for download at: http://www.berrywood.com/wp-content/uploads/2011/08/DemingPaper.pdf
 The System of Profound Knowledge is discussed in detail in Edwards Deming, The New Economics for Industry, Government and Education – 2nd Edition, MIT Center for Advanced Educational Services (1994). Additional information is available on-line at: https://www.deming.org/theman/theories/profoundknowledge
 The Thinking Processes are discussed in detail in Goldratt’s It’s Not Luck, North River Press (1994)
 For more on systems, see Systems and Constraints, this blog: http://blog.jerasustainabledevelopment.com/2013/09/25/systems-and-constraints/ and More on Processes and Systems, this blog: http://blog.jerasustainabledevelopment.com/2013/05/15/more-on-processes-and-systems/
 Cox and Schleirer, editors, Theory of Constraints Handbook, Introduction by Eliyahu Goldratt, McGraw Hill (2010)